Understanding How Airdrops and Claims Impact the Value and Pricing of their Underlying NFT Collections

As the CEO of Silks, currently the #1 sports NFT project on the Ethereum blockchain on Opensea, I spend a lot of time dealing with game theory, pricing, tokenomics and other subtleties that drive value in the NFT economy. I am in a unique position to share an insider’s perspective of how these components shape the value of an underlying project. This article will help the reader understand the nuanced components of an NFT to better determine its value.

Airdrops

In the context of traditional NFT projects, an airdrop is a common method used by a creator to distribute free digital assets to the holders of its collection. It is typically used as a mechanism to incentive collectors to hold their NFTs rather than flip them. By example, if you were the holder of a Clonex avatar, you would have received several valuable NFTs in your wallet. To date, these airdrops included two NFT “microverse” galleries to showcase your NFTs (a Space pod and Loot pod), and a mysterious container called a Monolith which provides for access to further airdrops. These assets were incredibly valuable when distributed and have strong secondary markets. If you purchased a Clonex in the original mint, you were rewarded over time with airdrops that surpassed the value of your original investment.

Creator’s have multiple concerns around using airdrops — they are expensive to deploy and there are many scams causing recipients to be weary of clicking on them when received.

Claims

Claims are substantively similar to airdrops in that they provide holders with valuable rewards. However, their form of delivery better protects the community. To receive a claim you must own an NFT that has a valid claim. You typically go to the creator’s site and connect your wallet to receive the claim. Once your claim is processed, the claimed asset appears in your wallet and the site records that your NFT has received its claim. There are tools that can help you identify if an NFT in the collection has an open claim or if its claim has already been processed.

Projects use claims as opposed to airdrops for several reasons including reduced distribution costs as there is no gas paid on the part of the creator. Additionally, the NFT owners must overtly make their claims rather than assets appearing in their wallet automatically. Claims typically expire at some point which limits their supply and can increase the value of the entire claim collection.

Pricing and Value Implications

Airdrops and claims directly impact pricing and value of the collection they are attached to. To understand the relationship between the two, I will use the recent Silks Genesis Avatar mint and the Silks Sky Falls Pyramid claim as the basis for my analysis and explanation.

On April 27, 2022, Game of Silks (Silks.io) dropped their first NFT, a genesis collection of avatars that serve to represent the identity of founding community members and confer many unique and valuable benefits on them. The mint price was .15 ETH for white list and early access and the public was able to participate at .2 ETH. In the two months following the mint the crypto market went into a free fall and most NFT prices followed suit. However, the Silks Genesis Avatar NFT collection experienced (and continues to experience) a rising floor. Today the floor for a Silks Genesis Avatar sits at around .6 ETH or 4X what the early minters paid. But that does not reflect its true value as you will discover shortly.

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Two weeks ago, Game of Silks announced a claim called Project Sky Falls. Sky Falls is represented as an NFT in the shape of an inverted pyramid and there is a hint that it contains something valuable inside of it. However, nothing else is known about the mysterious NFT. If you own a Silks avatar you can go to their website and claim a Silks Sky Falls Pyramid. Since the claim was deployed, nearly 1000 avatar owners have claimed their pyramids and a liquid market has formed around them with a floor of roughly .4 ETH.

Lets now examine the relationship between the Sky Falls claim and the actual Silks avatar.

Many people are buying avatars, claiming a Sky Falls pyramid and then reselling the avatar without the claim. Generic avatars with stripped claims are currently selling at a floor of approximately .6 ETH. When you add back the current value of the pyramid as dictated by the floor in its market (.4 ETH) you would expect an avatar with an intact claim to trade at a 1 ETH floor. We’ll, that’s exactly what is happening. The floor for an unclaimed avatar is indeed 1 ETH, demonstrating that the Silks market is acting rationally. Considering this, on an absolute basis (ETH to ETH), everyone that invested in a Silks Genesis Avatar at mint is enjoying a nearly 7X return on their investment in a bear market. Indeed, this is exactly what quality “blue chip” projects aim to do — create massive value for their early community that supports them.

Many holders of airdrops and claims in traditional NFT projects strip their claims, sell them and essentially own their collections at a zero cost basis. While this may sound like an appealing strategy, it can be counterproductive — especially when the claim is part of a game and may be integral to the future gameplay. The reality is that until the claim is revealed, no one knows its real value which creates another layer of gamification. If you look at some of the early drops/claims, selling pre-reveal was short-sighted as once revealed, the assets turned out to be much more valuable than they traded at unrevealed.

As a Silks insider, its fascinating for me to watch the market develop as the community speculates on the value of unrevealed Silks Sky Falls Pyramids. It will be fun to look back at the speculation once the reveal takes place and reflect on what the market got right and wrong around its value. This type of analysis can already be done with the original Silks Genesis Avatar collection as Opensea allows you to see the actual NFT that was revealed in a pre-reveal transaction. You can easily see that by looking at the hundreds of Silks transactions on the activity tab on Opensea. Any transaction dated before the reveal was an unrevealed avatar. I personally take great pleasure in looking back at the mint and seeing unrevealed Silks Identity Capsules (the unrevealed avatars) acquired and sold by small-minded flippers for a quick .05 ETH profit when the revealed assets were super rare avatars that sold for 3-5 ETH! Every flipper has “tripped over pennies” and I truly wonder whether these flippers ever went back to analyze how poorly their tactics played out. Flipping a Sky Falls Pyramid pre-reveal can play out the same way as the original avatar mint if rarity plays a factor. Unfortunately, you’ll have to wait a little bit to find out!